Set forth below is text of a comment that I recently posted to the discussion thread for another blog entry at this site:

There has never been a buy and hold crisis.  In fact, buy and hold has always worked.  We have a market timing crisis where people get in and out of the market and cause chaos.  Further, we have never seen a successful outcome from any market timer and you, yourself, have had a complete retirement failure while pushing a timing scheme.

Okay, Anonymous.

I don’t agree. But I do wish you well.

Rob

Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

So what good is your timing scheme when it never drops to a level that you like?  Meanwhile, buy and hold has always worked for every 30 year period.

Bringing on a Great Depression wasn’t working. Bringing on the stagflation of the 1970s wasn’t working. Bringing on the economic crisis of 2008 wasn’t working. We would all be better off if we did everything in our power to rein in irrational exuberance when it appears on the scene. That requires valuation-based market timing. There is no other way.

That’s my sincere take re this terribly important matter, in any event.

Rob

Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

Movies are make believe.  Being broke is a hard reality.

Grapes of Wrath told the story of a Buy-and-Hold Crisis that really happened. My parents lived through it. They told me stories of what it was like. I don’t like the idea of my boys (and millions and millions of others) having to live through something like that.

Buy-and-Hold Crises have been optional since 1981. All that we need to do is to open up every site to honest posting and we can use the peer-reviewed research to persuade stock investors to keep the irrational exuberance garbage under control.

I can live with that. I think that a 6.5 percent real annual return is just fine. Permitting irrational exuberance to get out of control hurts all of us.

Rob

Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

It really isn’t that hard to look up, Rob.

Try this:

https://www.macrotrends.net/countries/USA/united-states/consumer-spending

Notice how your comments about the 1970’s stagflation go out the window when you look at the bar chart.

Consumer spending generally goes up over time for the same reason that stock prices generally go up over time — the economy is growing over time. But the loss of trillions of dollars of irrational exuberance is obviously going to cause the growth in consumer spending to be less than what it would be if we permitted honest posting re the peer-reviewed research and both stock market prices and the economic system (of which the stock market is a part) were stabilzed.

Here is a graphic showing consumer spending over a long period of time:

https://fred.stlouisfed.org/series/DPCERE1Q156NBEA

There’s a drop in the 1960s and 1970s, when we were recovering from the high stock prices of the early 1960s. Look at the years after the early 1980s, when the bull market that we are currently in was beginning. Consumer spending is a rocket ship. When stock prices drop 70 percent (we usually drop to a CAPE of 8 when a bull market comes to an end), you are going to see that rocket ship reverse course. How could it be otherwise?

The question on the table is — Should we just accept the 6.5 percent annual gain that is the product of real economic growth? Or should we be pumping the market up for a time with the Get Rich Quick/Buy-and-Hold stuff, thereby bringing on economic crises that cause an ocean of human misery. I am fine with 6.5 percent annual gains without all of the human misery that we cause when we tell people that there is no need to practice market timing/price discipline when buying stocks.

Rob

Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

“ Valuations matter. Rationality matters. Market timing matters.

That’s it. That’s a lot.”

Even though you rarely respond to the questions answer, I still give the courtesy of addressing your point. So, to the above comment, it is RESULTS that matter. This is what pays the bills. Valuation is merely analysis of where you think it might go. It might be higher or it might be lower, so we look at results to know who was right. We can only spend what we currently have. The grocery store doesn’t care about your opinions on Greaney or Shiller or Pfau.

Long-term results are what really matter, not the short-term stuff that you get from creating mountains of irrational exuberance.

I see all the difference in the world between economic-growth gains and irrational exuberance gains. I say that we should count only economic growth gains when forming our retirement plans. Counting the irrational exubernce stuff is likely to lead to a disaster down the road a bit.

That’s my sincere take, Anonymous.

Rob

Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

How would “honest posting” about index funds investing have prevented the subprime loan crisis?

In numerous ways. You can’t have trillions of dollars of pretend money (that’s what irrational exuberance is) sloshing around the economy and not suffer devastating consequences.

Much of the irrational exuberance ended up being useed to psy inflated prices for real estate. A person whose stock portfolio is temporrily priced at two times its real value is far more open to paying an inflated price than someone who is aware of the real, lasting value of his stock holdings.

The Federal Reserve felt pressured to keep interest rates lower than it otherwise would have as a means of keeping stock prices from collapsing.

Once stock prices started falling, investors collectively lost trillions of dollars of consumer buying power. This caused hundreds of thousands of businesses to go under.

The failing businesses had to get rid of millions of employees. People without jobs do not spend as much as they did when they had jobs.

An economy built on irrational exuberance is an economy positioned for collapse. Pumping in irrational exuberance (But-and-Hold! No market timing!) makes the economic look stronger than it is for a time. But all you have done when you have told people not to bother with market timing is to erect house of cards. The economic realities remain what they were before you pumped up stock prices with your claims that market timing is not really needed. The economic realities always prevail in tje end. They have to. If they didn’t, the entire system would collapse, which would be the worst outcome of all.

Valuation-Informed Indedxing (market timing!) just permits the economic realities to assert themselves more quickly. When you permit people access to discussion of what the last 41 years of peer-reviewed reserch teaches us all about this important subject, many of them elect to invest rationally. The Buy-and-Holders ASSUME an efficient market but take away the tool (market timing) that is essential to creating it. With market timing, the market is able to actually achieve efficiency in the real world. Valuation-Informed Indexing makes the Buy-and-Hold vision os what the market is a reality and that of course makes the economy much stronger and more productive.

Businesses need to know how popular their products and services are. How could they possibly know when trillions of dollars of irrational exuberance are sloshing around, causing people to make purchases they would never make if they were permitted to know the real numbers? Shiller did not put an exxlamation mark after the words “Irrational Exuberance” in the title of his book. He was not saying that it is a good thing. Irrational Exuberance is a cancer. We should all be doing everything in our power to rein in irrational exuberance to the greatest extent possible. That means providing regular reminders to our friends and neighbors and coworkers of the importance of market timing.

Rob

Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

In your utopia the stock prices can never be rational, as people are still just buying and selling without a thought given to the valuation of the individual companies. The index is weighted. If you had index funds in January 2022 you were holding a whole lot of Apple, Google, Facebook and Tesla. These were overvalued. Outside of my 401k I was holding onto mostly oil and tobacco stocks at the time. Some buy and holders (myself included) have seen their retirement savings increase during this recent bear market. More sophisticated people used options. I believe Bill Gates shorted Tesla. There’s more than one way to skin a cat.

The thing about index funds is they are dumb money whether you just follow a three fund portfolio or if you do VII. When enough people get into it, it can move markets but it’s dumb money either way. Now I’m not saying indexers are dumb. My 401k is in index funds, most people should just use index funds, but it is what it is.

I don’t see how VII could have prevented a financial crisis that was brought on by things unrelated to CAPE valuations. Care to explain in detail?

I see indexing as a huge advance. I don’t think of indedxing money as dumb money at all. An indexer is taking a bet that the U.S. economic system will remain sufficiently productive to support a strong stock return. It’s been doing that for 150 years now. So I think it is smart to believe that it may well continue doing it.

I don;t have any objections to investing in individual stocks. I think it takes a lot of work to get it right. So I would advise people not to do it unless they are sure that they love researching stocks enough for it to pay off. For the average person, I recommend index funds. But for the right person, I think it can make sense to pick individual stocks. I am glad that index funds are now an option.

The heavy promotion of the Buy-and-Hold “strategy” is always going to cause an economic crisis. It is impossible that it ever would not.

In every market that has ever existed, price discipline is the thing that makes the market work. That’s true in the car market, the banana market, the shoelace market and on and on and on. All that Shiller really did was to demonstrate that the way things work in every other market that has ever existed is also the way they work in the stock market. Price discipline/market timing is the thing that keeps the market functional. So long as most investors are engaging in market timing (adjusting their asset allocation as needed to keep their risk profile constant over time), market prices will always be roughly right. When investors start acting as if price doesn’t matter (that is, sticking with the same stock allocation no matter how poor a value proposition stocks come to provide), things go haywire. Stock prices go up and up and there is nothing to bring them down. Since the market eventually must get prices right (that is the core purpose of any market), it eventually crashes them. Which does great harm to our economic system (price crashes take huge amounts of buying power out of the economy).

Buy-and-Holders blame economic developments for price crashes. But the causation is in the opposite direction. It is price crashes that cause economic crises. Price crashes take trillions of dollars of spending power out of the economy. It would be better to just price stocks properly. Then we wouldn’t have either price crashes or the economic crises that follow from them. The hitch in the minds of the Buy-and-Holders is that to price stocks properly we have to encourage market timing. For prices to be set properly, investors need to be willing to act in their own best interest. It is in the best interest of investors to consider the long-term value proposition of stocks before purchasing them. But Buy-and-Holders tell investors that they must never do that, that they must always invest in stocks blindly, that they must never consider how much the current CAPE value affects the long-term value proposition.

Take Buy-and-Hold/Get Rich Quick investing strategies out of the equation and there is not reason to believe that we would have any more of these horrible economic crises. I believe that we would still have modest ups and downs. But nothing like what we have experienced during the days when we did not know how stock investing worked in the real world (the pre-Shiller era). We are really still in the pre-Shiller era today because, while we have his research available to us to help us become better investors, we have not yet as a nation of people given ourselves permission to discuss it at every internet site. Having Shiller’s book available in most public libraries doesn’t do us much goos if we are not all actively discussins its far-reaching implications with our friends and neighbors and co-workers on a daily basis. It is by discussing things that we come to understand them and learn how to apply what we have learned to our daily life choices.

Minimizing the use of Get Rich Quick/Buy-and-Hold investment strategies would stabilize the stock market and thereby would stabilize out economic system as well. And stabilizing our economic system would stabiize our political system to a considerable extent as well. It’s a win/win/win/win/win. I am not able to imagine any possible downside.

Rob

Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

The problem with you claiming that intercst should have corrected the study that day is that your suggestion would not have come up with a number lower than 4%. You suggested dividing the withdrawal rates that survived in to 3 buckets (from high, medium and low stating valuations). All the 30 year surviving percentages were 4% or higher, dividing those numbers into 3 groups would not have changed that.

I didn’t know on May 13, 2002, that the safe withdrawal rate for retirements beginning in January 2000 (the high point of the bubble) was 1.6 percent. I learned that as the result of the research that I did with John Walter Russell. But it was my May 13, 2002, that made John Walter Russell aware of the aituation and that led down the road to our research efforts.

So Greaney couldn’t have said on May14, 2002, precisely what the safe withdrawal rate was at all of the various CAPE levels. That research had not yet been done. But it was obvious that the correct number was lower than 4. 4 is the number you get when you don’t count valuations. Valuations were sky high at the time. The correct number was obviously a number a good bit less than 4.

Greaney should have added language to the study noting that he had failed to include a valuation adjustment and that the correct number was obviously a good bit less than 4. Then he should have participated in the research efforts to identify the correct number (both John Walter Russell and I invited him to join us and many, many community members would have been thrilled if Greaney dropped all the abusive stuff and participated in constructive efforts).

The goal of everyone should be to get the numbers right. That’s why I constantly say that we need to open every site to honest posting, It is possible that someone somesay will come up with an argument that the best number for retirements beginning in January 2000 was 1.5 or 1.7, not 1.6. If that happens, we will need to incorporate that new knowledge into our collective understanding (and we should of course thank the person who provided it). Under no circumstances should we threaten to murder the loved ones of those who add to our knowledge base. There shouldn’t be any controversy over that one. And there wouldn’t be any in any field of human endeavor other than the investing advice field (where there are dollars attached to attaining a reputation for possessing expertise and thus a particular unwillingness to acknoowledge errors made when not all the reaseah needed to know everything was avalable).

Greaney’s abusive behavor began about an hour after I put up the fateful post. I don’t believe that he knew at that time that the correct number for retirements beginning in January 2000 was 1.6 percent. But he clearly knew that he had not included a valuation adjustment in the study and that there was good reason to believe that one was needed to get the numbers right. Just saying that would have been a huge help. We had an entire community of people excited about the propsct of rolling up its sleeves and getting to the bottom of the safe withdrawal rate business. We lost our best people after they saw the death threats and the other garbage that you Goons advanced. But on the morning of May 13, 2002, we were in an amazing place to do some amazing work together that would have helped millions of people. Had we opened every site to honest posting in a short time, we could have gotten the CAPE value down (through market timing!) and avoided the economic crisis of 2008. That alone would have had huge economic and political benefits for all of us.

Rob

Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

“ Why do I have a funny feeling that there will indeed be a long line of attorneys standing outside my door in the days following the next Buy-and-Hold Crisis? It will be interesting to see how it all plays out.”

You have had hundreds of “funny feelings” over the last 20 years. We saw those play out. You ended up broke and divorced. Those funny feelings don’t seem to be a good thing for you.

We disagree, Anonymous.

Yes, it is very, very, very painful that I am broke and divorced. That part is so.

But the good news here has been 20 tumes as good as the bad news here has been bad.

I’ve got a tiger by the tail. Say that opening every site to honest posting leads to every stock investor accumulating an extra $300,000 in the course of his or her investing lifetime. That’s money that could be put to use toward financing an early retirement or a college education or a vacation home or toward supporting a favorite charity. That’s life-changing money. And we are not talking about a small number of people getting to see that sort of life enhancement. We are talking about millions and millions.

Yes, my decision to post honestly re the last 41 years of peer-reviewed research has hurt me in the short term. But the only reason why there are any Buy-and-Holders who have an objection to the wideapread discussion of Shiller’s Nobel-prize-winning research is that they see how huge an advance this is and cannot bear to acknowledge that there was a time when they did not know everything there is to know about this subject. That’s not a good reason. The shift from Buy-and-Hold to Valuation-Informed Indexing will be the biggest advance we have ever seen in the history of personal finance. That enough to give meanng to 50 lifetimes. And I am well on my way to achieving iit n only the one that I was given.

I naturally wish that I could have achieved all the good without having had to experience any of the negativity. Obviously. I have requested that you Goons knock off the funny business on thousands of occasions. But I do want to see us all move to a place where we can live better and fuller and richer lives than we ever imagined possible in the Buy-and-Hold days, So I am going to stick it out. I can do no more and I can do no less.

My best and warmest wishes to you and yours.

Rob

Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

Wade’s firm charges clients a percentage of their investment balance.  If your market timing scheme worked, they would follow it because they would think that they could make more money.  They see that timing hasn’t worked and that the last 2 decades have been a disaster for people like you.  That’s why they don’t push VII.  Results matter.

Market timing has always worked. The Bennett/Pfau research shows that beyond any doubt whatsoever. It is absurd to think that there could ever come a time when market timing would not work. Market timing is price discipline. Price discipline is the magic that makes market function properly. Take away market timing from the stock investing project and you are eventually going to see a price crash/economic crisis. It’s inevitable once you make the market dysfunctional/price indifferent.

The issue is that market timing only works in the long run. Get Rich Quick/Buy-and-Hold strategies often provide good short-term results. After the next Buy-and-Hold Crisis, when every internet site has been opened to honest posting re the past 41 years of peer-reviewed research, I am confident that Wade will do right by his clients. Most people who work in this field long to be able to be helpful to their clients. Open every internet site to honest posting and they will be able to make money doing so. It’s a win/win/win/win/win.

My sincere take.

Rob